Industry life cycle

1) Pioneering Phase
Characteristics: low demand for the industry’s product, large upstart costs.

2) Growth Phase
Characteristics: little competition and accelerated sales, survived the pioneering phase and are beginning to recognize sales growth.

3) Mature Growth Phase
Characteristics: above average growth, but no longer accelerating growth, face increasing competition, profit margins begin to erode.

4) Stabilization/Maturity Phase
Characteristics: average growth, face significant competition and the return on equity is now more normalized, typically longest phase an industry will go through.

5) Deceleration/Decline Phase
Characteristics: declining growth as demand shifts to other substitute (new) products

Example industries
· Consumer staples: ( neccessities- Pharma, food, etc.) outperform in recession.
· Consumer durables: (DVDs, cars) outperform as the economy is pulling out of recession.
· Capital goods: (Heavy goods, chemicals, etc.) outperform further on in recovery as business is more likely to renovate, modernize and purchase equipment.
· Financial stocks- near end of recession(bottom of trough), increase as anticipation of economy recovery)
· Basic industries: (Mining, oil, etc.) outperform best at the top of the GDP cycle.